Indian Carriers Deliver Their Worst Quarterly Performance In At Least Three Years
India’s top three airlines reported their worst quarterly performance in at least three years due to higher fuel prices, weaker rupee and competitive fares.
InterGlobe Aviation Ltd.-operated IndiGo, Jet Airways (India) Ltd. and SpiceJet Ltd. flew 70 percent of air traffic in the world’s fastest-growing aviation market, but at a loss. The combined net loss before tax reported by these three companies was more than Rs 2,600 crore—the highest in at least the last three years, or since IndiGo’s debut on the bourses—according to BloombergQuint’s calculations.
Their fuel cost per available seat kilometer also rose on the back of an increase in jet fuel prices, which accounts for more than a third of an airline’s operating costs. The rising global crude prices only made the aviation turbine fuel in India, which is the most expensive in Asia due to higher taxes, costlier. That, coupled with a double whammy of a weakening rupee and the airlines’ ability to raise ticket prices in a highly competitive industry, led to the loss. Though the rise in fuel cost of the country’s largest airline was in line with an increase in jet fuel prices, the cost of its listed peers was higher than usual. Increasing fuel costs negated the gains from a surge in demand for air travel.
Yields, a measure of the average earnings per passenger per kilometer, fell the most for IndiGo due to higher capacity deployment. The decline in yields was the least for SpiceJet because of the regional routes.
For an airline, most of its expenses are dollar denominated, which means that with depreciating Indian rupee, airliners need to shell out more. In the September quarter, the rupee, on an average, depreciated by 9 percent over last year. This led to at least a fivefold jump in foreign exchange losses.
Costs other than fuel increased the most of SpiceJet, while it rose the least for Jet Airways. The company has been able to do so on the back of cost-saving initiatives.
Yet, IndiGo was the only airline to report better operational performance than peers. Jet Airways and SpiceJet reported a loss in earnings before interest, tax, depreciation, amortisation and rental cost in the September quarter.